Content Headings

Key Issues

Example clauses

Notes and References

Dispute resolution and jurisdiction

The parties need to ensure that a court or an arbitral body in whom the parties have confidence can resolve any conflict or disputes in relation to the agreement.  In addition, the parties need to ensure that the final determination of the court or arbitral body concerned is enforceable against the other party.  The parties would want to be able to enforce any decision in the jurisdiction (or jurisdictions) in which the assets of the other party are located.  Most countries have laws that prevent or limit the enforcement of judgments of a foreign court in its jurisdiction (that is, without review by a court in the jurisdiction).  Many countries, however, are signatories to an international convention on the enforcement of arbitral awards, which means that (in theory at least) the parties would be able to enforce the arbitral awards in that jurisdiction.  Other advantages of arbitration are that they can be private, the parties can select their own arbitrators and the process can be more flexible than the court process.  The downside to arbitration is that it is often more expensive than the court process, the process can be cumbersome and administrative, and there can be delays in arbitral hearings.

Alternative 1 is a standard clause conferring jurisdiction to a court of a jurisdiction agreed by the parties.

Arbitration decisions are legally enforceable if a country has adopted laws to say that arbitration decisions are legally binding.  Foreign arbitration judgments would be enforceable in countries that are signatories of a convention on enforcement of foreign arbitration judgments.

It is not necessary to set out the process in such detail as in Alternative 2, unless the parties wish to.  The dispute will be heard according to the procedures stipulated in the arbitration tribunal chosen.

Alternative 1

Conciliation

Before referring a dispute or difference to arbitration under clause [arbitration] the Parties shall establish a conciliation team to attempt in good faith to resolve the dispute or difference promptly according to the following arrangements:

(a)  the conciliation team shall consist of two (2) senior representatives nominated by the Authority and two (2) senior representatives nominated by the Concessionaire; those nominations shall be made within seven (7) days of either Party notifying the other that it wishes to establish the conciliation team;

(b)  the purpose of the conciliation team is to try to agree between the representatives how best to resolve the dispute or difference and then to make recommendations to the Parties; recommendations of the conciliation team must have the unanimous support of all the representatives;

(c)  the dispute or difference shall be resolved if the Parties accept the recommendations made by the conciliation team and enter into a written agreement describing the arrangements for resolution of the dispute or difference; the written agreement shall be binding on the Parties;

(d)  to avoid doubt, the conciliation team by itself shall not have the power to vary this Agreement;

(e)  the conciliation team shall have joint chairmen, consisting of one representative of the Authority and one of the Concessionaire; the Joint chairmen may adopt such procedures for the conduct of the activities of the conciliation team as they consider appropriate, from time to time; and

(f)  if representatives have not been nominated by the required time or if the conciliation team is unable to agree its recommendations to resolve the dispute or if the Parties do not agree in writing to resolve the dispute, within sixty (60) days of any Party notifying the other that it wishes to form the conciliation team, the dispute shall be referred to arbitration under the following provisions of this clause.

Arbitration

Any difference, dispute, controversy or claim arising from, out of or in connection with this Agreement, or the interpretation thereof or the rights, duties, obligations, or liabilities of any Party or the operation, breach, termination or invalidity thereof which arises or occurs between the Parties to this Agreement, other than to those which clause [ref] applies, shall be referred by either Party to arbitration for final settlement in accordance with clauses [arbitration process].

Each of the Parties submits to arbitration in Colombo (or such other place as the Parties may agree in writing at the start of any arbitration proceedings) before a panel (the "Arbitral Tribunal") of three (3) arbitrators under the Arbitration Rules of the United Nations Commission on International Trade Law ("UNCITRAL") as then in force, as modified by clauses [process]. The proceedings shall be conducted and the award shall be rendered in the English Language.

Each Party shall appoint one (1) arbitrator and the two (2) arbitrators so appointed shall appoint a third (3rd) arbitrator. The (3rd) third arbitrator shall be the chairman of the Arbitral Tribunal. If either Party fails to appoint an arbitrator or if the two (2) Parties appointed arbitrators fail to agree upon a third arbitrator, then such arbitrator shall, at either Party's written request, be appointed by the Chairman of the International Court of Arbitration of the International Chamber of Commerce acting in accordance with the rules adopted by the International Chamber of Commerce for selecting in arbitrator but without giving effect to the provisions of paragraph 6 of Articles 9 of these rules.

Any award rendered by the Arbitral Tribunal shall be final and binding and judgement thereon may be entered in any court of competent jurisdiction. Any monetary award shall be made in reasonable time and payable in [currency] free of any tax, deduction or offset and the Arbitral Tribunal shall be authorised in its discretion to grant pre-award and post-award interest at commercial rates. Any costs, fees or taxes incidental to enforcing the award shall, to the maximum extent permitted by law, be charged against the Party resisting such enforcement.

The Parties hereby waive and agree to exclude any rights of application or appeal to the fullest extent permitted by law in connection with any question of fact or law arising in the course of the arbitration or with respect to any award made except for actions to enforce an arbitral award.

Except as expressly provided in this Agreement, pending the award in any arbitration proceedings hereunder, (i) this Agreement and the rights and obligations of the Parties shall remain in full force and effect and (ii) each of the Parties shall continue to perform their respective obligations under this Agreement. The termination of this Agreement shall not result in the termination of any arbitration proceedings pending at the time of such termination nor otherwise affect the rights and obligations of the Parties under or with respect to such pending arbitration.

Any award rendered by the Arbitral Tribunal shall determine the extent to which the costs of the arbitration are to be borne by each of the Parties.

The reference to the arbitration, all proceedings in the arbitration and all documents and copies of documents or records produced on discovery or created for the purposes of the arbitration shall be confidential to the Parties and the arbitrators and shall not be disclosed to any other person (other than the Lenders) without the express prior written consent of both Parties, except as may be necessary to enforce the terms of any award made by the arbitrators or to challenge the conduct of the arbitrators or the validity of any award in a court of competent jurisdiction. The powers of the arbitrators shall include the power to conduct proceedings in part in any place other than Colombo where the arbitrators in their sole discretion determine that it is necessary for the more effective and efficient determination of the matters before them.

The Parties hereby waive any objection to or claim of immunity in respect of the enforcement of any arbitral award made by the Arbitral Tribunal; and each party represents, warrants and affirms that it is not entitled to claim immunity in connection with any proceedings relating to an arbitration or arbitral award under this Agreement.

Expert

Any dispute, difference, controversy or claim of any kind which arises or occurs between the Parties as to any thing or matter arising under, out of or in connection with this Agreement or otherwise in connection with the implementation of the Project shall be determined by an expert (the "Expert") if:

(a)  This Agreement expressly so provides; or

(b)  The Parties so agree in writing.

Either party may initiate the reference of a dispute described in clause [ref] to an Expert by proposing to the other party the appointment of an Expert. Clauses [arbitration] shall not apply to matters to be determined by an Expert and in particular there shall be no arbitration challenging the Expert's decision.

The Expert shall be a civil engineer, a transport economist, a toll road manager, a transport economist (specialising in transport project economics for operating issues), or other person experienced in the construction or operation of road projects or a financial expert having experience in similar infrastructure projects implemented through public private partnership (as appropriate), except for disputes principally concerning the manner in which an amount, sum or quantity is to be calculated, where the Expert shall be an individual who holds an internationally recognised qualification in the relevant field.

The Expert shall be appointed by agreement between the Parties or, if the Parties have not agreed within fourteen (14) days of the date of the request, on the application of either party, [the President of the Institute of Engineers of [country]] in the case of technical or non financial matters or the President of the Institute of Chartered Accountants of [country] in respect of financial matters as appropriate shall appoint an Expert.

The Expert shall act an expert and not as an arbitrator. The decision of the Expert shall be final and binding on the Parties and may include orders that one or both of the Parties are to pay his reasonable costs, stating the proportion and that one party is to pay the costs (or a proportion of the costs) of the other party and/or compensation for increased costs incurred by a party as a result of the reference to the Expert. If either party does not pay its proportion of the Expert's costs, the other party may make such payment and that party shall be entitled to an immediate reimbursement of such amount from the party in default plus interest at the AWPR + 2%

The Expert shall have the power to order (and each party agrees to adhere to such an order) each party to pay from time to time and in equal amounts, sums to settle his reasonable costs to date. This power shall also extend to the reasonable costs of any advisor or other person referred to in clause [ref]. The Expert shall take account of any such sums paid by the Parties when, on costs he should make pursuant to clause [ref] which may result in one party being ordered to reimburse the other party amounts so paid by the other party together with default interest at the AWPR + 2%

The Parties shall each have the right to make written representations to the Expert with notice and a copy to the other party. There shall be no formal hearing. The Expert shall regulate procedure as he sees fit (except that he must give each party a reasonable opportunity to make representations), including, if the Expert chooses, requiring written submissions and/or hearing witnesses in person. The Expert's powers shall include the power to open up, review and revise any notice and determine all matters in dispute. He shall be instructed to make his determination as soon as possible.

The Expert may take such advice and assistance from independent professional advisors or other persons as he considers appropriate to enable him to reach a determination of the dispute.

Each of the Parties shall upon and in accordance with a request by the Expert supply to the Expert free of charge such information and documents as he shall require for the purposes of the reference to him. That information and those documents shall be kept confidential by him and by the Parties.

If any dispute referred to an Expert raises issues which, in the reasonable opinion of either party, are substantially the same as or are connected with issues raised in a related dispute between any of the following persons (or their successors in title and permitted assignees):

(a)  the Concessionaire; or

(b)  other sub-contractors of the Concessionaire;

the Parties agree that the related dispute shall be referred to the Expert appointed to determine the dispute under this Agreement and the Concessionaire shall procure that it has the power in its contracts with the persons described above to procure the related dispute is dealt within that manner.

Alternative 2

Both parties agree that the courts of. shall have exclusive jurisdiction to hear and settle any action, suit, proceeding or dispute in connection with this Agreement and irrevocably submit to the jurisdiction of those courts.

See SOPC Section 27.

Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.